Allied World and net investment gains boost Fairfax in Q1

Fairfax Insurance Holdings, the re/insurance conglomerate which includes OdysseyRe, Allied World and Brit, posted stellar growth and big profits in the first quarter of 2018 though its growth was largely due to premiums from Allied World, which it acquired in July last year, being added for the first time.

The company posted pre-tax income of $1 billion in the quarter, a big increase on the $100 million it posted a year earlier; its net earnings were $684.3 million in the quarter, a big increase on the $82.6 million it posted in Q1 2017.

The change was largely due to big net gains on investments, which contributed $934 million it its result compared with a loss of $18 million a year earlier. This included a non-cash gain of $596.8 million after non-controlling interests related to a change in accounting for Quess Corp.

Its underwriting profit was table at $109.1 million compared with $107.2 million a year earlier. The combined ratio of the insurance and reinsurance operations was 96 percent on a consolidated basis, producing an underwriting profit of $109.1 million, compared to a combined ratio and underwriting profit of 94.6 percent and $107.2 million respectively in 2017.

Its gross written premiums reached $3.9 billion in the quarter, a big increase on 2017 Q1 when they were $2.6 billion; its net premiums written increased to $3.2 billion compared with $2.2 billion a year earlier.

The biggest contributor to this growth was Allied World, which added $735 million in net premiums to its book. It acquired the company in July 2017.

OdysseyRe enjoyed strong growth, increasing its net written premiums to $689.7 million, compared with $555.2 million a year earlier; Brit’s net written premiums increased to $408.6 million compared with $394.4 million the year before.

"Our insurance companies continued to have excellent underwriting performance in the first quarter of 2018 with a consolidated combined ratio of 96.0%, with Zenith National at 86.1%, OdysseyRe at 91.2% and Allied World at 94.8%, and our operating income was strong at $238 million," said Prem Watsa, chairman and chief executive.

“As a result of Thomas Cook India changing the accounting for its ownership interest in Quess Corp. from a subsidiary to an associate company, under IFRS Quess was de-consolidated and Fairfax's ownership interest in Quess through Thomas Cook was recorded at fair value for a gain of $596.8 million after non-controlling interests. We continue to be soundly financed, with quarter-end cash and marketable securities in the holding company exceeding $2 billion."

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